Auction - Buying Property

One major advantage of buying at auction can be a reduced purchase price. But what are the pitfalls? How does one go about buying a house at auction? If it is so much cheaper then why doesn’t everyone buy at auction? All of these questions and more are answered in this ibuytolet guide to buying at auction.

Introduction to buying to let at auction

If you are buying to let, getting a better property for a cheaper price means that you will be able to earn a higher rental yield. However, there are several key points for consideration before committing to buy an auction property. This section provides a guide to the pitfalls and benefits of buying an investment property at auction.

Before the auction

Usually, as a buyer, you will have to make a commitment to the property before the auction begins, meaning non-refundable expenses. You may also need to have finance ready before the auction, have had a survey conducted, and be sure that the documentation of the contract passes legal scrutiny. Even after carrying out all of these measures, there is no certainty that you will win the auction, and you could be left out of pocket. The time available to you to organise all of these things is often under a month: between receiving the auction ‘lots’ and the day on which the auction actually takes place.

It is often worthwhile to have a comprehensive survey done, although this may be more expensive. You should ask yourself why the property is at auction and why it is selling for a reduced price. A simple survey may not show up fundamental problems that could cause financial strain further down the line.

Why are the properties at auction? Properties put up for sale in auctions often come from mortgage lenders, and have been repossessed from defaulting borrowers. The aim of the lenders is to recoup the money as quickly as possible, and as such some great ‘reserve price’ bargains are available. Properties at auction are usually not part of a chain, and you can therefore purchase a house quickly and begin the rental process.

When buying at auction, you should enter with a

clear idea of your budget. Do not get carried away by the bidding and pay over your odds. You should know precisely your limits, even it means sacrificing the cost of a survey and solicitors fees. Start the auction with a fixed price limit in mind and do not exceed it. Remember, every extra pound you make will be eating into your rental profit and lessening your chances of being a successful buy to let landlord.

Should you bid for a property at auction and succeed, you will need to sign the contract (which you should have looked over by your solicitor before bidding) and pay a deposit on the spot. Some companies offer bridging loans in order to pay off this initial deposit.

Finding an auction

The process of finding auctions in your local area can be extremely difficult and time-consuming, with auction-houses seeking the custom of trade professionals only and estate agents unwilling to help. Even if you find a property auction, the houses being sold may be in another part of the country. Auctions may also charge for their catalogues and information. Obtaining accurate information on the auctions in your area could net you a real bargain, so any information is valuable.

For more information see the ibuytolet list of property auction venues.

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